Early retirement will be possible for me and my wife in a few years in our early 40s.
With appropriate Cash Flows from our investments at some point in the future, we are hoping to live off Passive Income entirely as the family during our early retirement. People tend to reach the status of financial independence when their Financial Independence (FI) Ratio hits 100%.
Timeline for early retirement
As our passive income from investments grows, I have slowly started thinking about early retirement. This is the ultimately plan for my early retirement – focus entirely on managing the family wealth and working on my online projects. Hence, my primary job will be to manage our finances and keep on building passive income.
🗹 STAGE 1 of early retirement: In 2022
This was the year when me and my wife reached financial independence as our Financial Independence (FI) Ratio was around 100%. Yeah! This means that our passive income entirely covered our annual family expenses. Despite being fully financially independent, we have been working continuously to generate more capital for future investments.
That year, two out of four passive income streams were finished. Firstly, investments in real estate, and secondly, investments in bank deposits. So, I could focus entire on growing my online business and building the dividend stocks portfolio – another two passive income streams. When early retired, I want to focus entirely on managing the family wealth and working on my website. There is no need to work with other people, nor to hire or manage others.
To give you more context, we are, and have always been, completely debt free as we do not have any bank loans or mortgage. We only have very little credit card debt every month as my wife uses her credit cards for online shopping for groceries and baby products. We always pay it back in full and on time though. My wife mainly uses her credit cards for online shopping for groceries and baby products. Not much will change here either.
🗹 STAGE 2 of early retirement: In 2023
After working in big cities in China (i.e. Beijing and Shanghai) for the last 15 years, we both feel exhausted. Also, taking care of our very special baby boy is both physically and mentally tiring.
Last year, we were living in Zhanjiang where we have our home in southern China. Both my wife and I managed to test early retirement in our mid-thirties because my wife and I left our jobs at the same time. There is no better thing than the feeling of comfort of your own home when you wake up in the morning and go to sleep in the evening.
We had plenty of time to look after our two small children. However, we were very busy with our two little ones.
🗹 STAGE 3 of early retirement: 2024 – 2026
I work full-time now brining active income into our family budget.
Our Financial Independence (FI) Ratio is forecasted to be between 150% and 200% each year in the next three years between 2024 and 2026. The financial-independence party is just getting started! In fact, our FI Ratio for 2023, 2024 and 2025 is forecasted to be around 175% each year on average. However, due to the growth of our family our spending will most likely increase. Therefore, realistically speaking, I am looking at our FI Ratio to end up around 150% each year. This will give us 50% margin of safety which is decent. By the end of 2026, each Passive Income source is expected to bring us roughly RMB100,000 per year (~USD15,000 per year), altogether around RMB400,000 per year (~USD60,000). Our family budget is currently planned until December 31, 2026.
What is next?
Keep building wealth but slower. That is why we want to focus less on growing earnings aggressively and minimizing spending at all cost to maximize saving. In the short-term, we intend to focus more on acquiring good-quality assets that will continue earning us profit. In the long-term, our aim to focus more on steady, stable and sustainable wealth accumulation.
Despite being fully financially independent, we are planning to continue working in the next few years. We want to generate more capital by saving to invest. However, we are still planning to retire early to join the financial movement Financial Independence, Retire Early (FIRE). Perhaps just not yet.
🗹 STEP 4 of early retirement: 2027 – (…)
We will continue developing our four passive income sources including Real Estate, bank deposits, online business and stocks. I do not invest in any other things except the aforementioned four assets because I believe that they sufficient, sustainable and safe enough to build and maintain wealth in the long-term.
While we do not have specific long-term plans, after December 31, 2026, we could easily retire early anywhere in the world enjoying FIRE – Financial Independence Retire Early.
All in all, we can live quite comfortably on around RMB400,000 per year (~USD60,000) anywhere in the world.
